Using a pawnbroker - how it works and what your rights are
Source: The Office of Fair Trading, www.oft.gov.uk, 2003
You can go to a pawnbroker for a loan, but you will have to leave something
valuable (the pawn) as security.
The pawnbroker will ask you to sign a credit agreement. Do not sign
unless you understand all the conditions.
The pawnbroker will also give you a pawn-receipt which will either be
separate or will be contained within the credit agreement. Keep it – it
proves you own the item.
You get your item back (redeem it) by handing over your pawn-receipt
and paying what you owe under the agreement. You normally have six months
to redeem an item, but the pawnbroker may agree to a longer period when
you make the agreement.
If you cannot pay what you owe by the deadline, the pawnbroker may keep
or sell the item.
Some pawnbrokers also offer 'sale and buy-back'
schemes.
Disadvantages of using a pawnbroker
You may have to pay more interest on the loan than you would to a bank
or building society.
If you lose your pawn-receipt,
the pawnbroker can refuse to give the pawn back.
If you cannot pay what you owe and the pawnbroker sells the pawn, it
may be sold for less than you thought it was worth. And if it fetches less
than you owe on the loan, you will have to pay the difference. See 'if
things go wrong'.
If your pawn sells for more than you owe, you will not automatically
receive the difference – you may have to ask the pawnbroker for it. But
the pawnbroker is legally obliged to pay over the surplus.
Sale and buy-back
Some lenders (including some pawnbrokers) offer 'sale and buy-back' schemes.
You sell an item to the lender and can then buy it back at a higher price
within a short period of time. It is also possible to arrange with the
lender to buy the item back in instalments (often called a 'set aside'
or 'lay by' scheme).
However, you do not have the same rights and protection under these
schemes as you do with pawning.
Other pages in this section
Source: The Office of Fair Trading, www.oft.gov.uk, 2003
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